- The Department of Justice is investigating alleged money laundering, bank fraud and sanctions violations at Binance
- Zhao lives in Dubai but could travel on his own to the US to face charges
- He helped spark the FTX collapse by pulling out Binance funds day before
Binance CEO Changpeng ‘CZ’ Zhao and the Justice Department are negotiating a $4bn deal to end the criminal probe into the crypto exchange, according to a report.
Zhao – who currently lives in Dubai – could return to the US to face charges and bring to an end the long-running investigation into alleged money laundering, bank fraud and sanctions violations, Bloomberg reported.
The deal could include a deferred-prosecution-agreement where the DOJ would file a criminal complaint against the company. The US would not pursue the prosecution as long as Binance adheres to certain conditions – the violation of which usually carry a penalty.
The DOJ could announce the deal as soon as next week, but the negotiations are still ongoing and the specific charges still not clear, according to Bloomberg.
The BNB cryptocurrency, a token that was created by Binance, soared by as much a 8.5 percent to $266.42 on the news.
Binance CEO Changpeng ‘CZ’ Zhao could face criminal charges as part of a $4billion deal with the Department of Justice to end a years-long probe
If the company does pay $4billion to end the probe, it would be one of the largest-ever penalties in a criminal cryptocurrency case.
The deal aims to allow Binance to continue to operate instead of collapsing, which would negatively affect markets and crypto holders.
It’s not clear if other executives besides CZ would face charges. Bloomberg notes the DoJ has pushed for a broad leadership change at the company.
The US government is seeking to find a balance between cracking down on Binance and disrupting the sector altogether after several high-profile collapses last year, including the bankruptcy of Binance’s former arch rival FTX.
Binance has been under the Justice Department’s scanner since at least 2018.
Federal prosecutors asked the company in December 2020 to provide internal records about its anti-money laundering checks, along with communications involving Zhao.
The DOJ probe is one of a string of legal and regulatory headaches the world’s biggest crypto exchange faces in the United States.
In June, the Securities and Exchange Commission sued Binance and Zhao, accusing them of operating an ‘elaborate scheme to evade U.S. federal securities laws.’
The SEC alleged in 13 charges that Binance artificially inflated its trading volumes, diverted customer funds, failed to restrict US customers from its platform and misled investors about its market surveillance controls.
The lawsuit prompted investors to pull around $780 million from the crypto exchange. forced the company to eliminate about one third of its US workforce and trading balances have slowed to a trickle.
Data firm Nansen said that Binance saw net outflows of $778.6 million of crypto tokens within 24 hours of the SEC lawsuit filing, and Binance.US registered net outflows of $13 million.
Binance denied the SEC’s allegations and said it would ‘vigorously defend’ its platform.
Zhao was an early FTX investor and withdrew just days before its collapse. He is seen with convicted fraudster, FTX founder Sam Bankman-Fried
The SEC lawsuit against Binance came roughly eight months after the collapse of FTX, which was also accused of co-mingling customers’ funds and investing the proceeds in high-risk investments that customers were unaware they were participating in.
Days before FTX collapsed, Zhao said Binance would liquidate its FTT tokens, a cryptocurrency issued by FTX.
The Binance announcement triggered a run on the bank at FTX – but the company didn’t have enough money to pay investors who wanted to withdraw their assets as customers tried to withdraw $6 billion in 72 hours.
Bankman-Fried was eventually convicted of massive fraud against FTX costumers.